I am a regular reader of your blog, and poring through your book for the third or fourth time – what a resource! I’m realizing how much I need to learn about the industry.
I had a question. In my research, I’ve been unable to find much in-depth information about insurance for DEs. I was wondering if you could do a blog post on suggested insurance packages for DEs? If I’m working from a home office and having the clothes made overseas, what type of insurance would you suggest? Property, insurance to cover the shipments… How much should a startup be willing to spend?
The issue with work stoppage insurance that I discussed in the book, is that -simplistically summarized- this is limited to employees carried on your policy. If you’re using off shore contractors, you can’t cover them (yet another disadvantage of producing off shore). While I won’t go so far as to say this sort of coverage is impossible, I’d think it’s difficult to acquire if you’re a small operation (there are alternatives via your doors, none pleasant). Rather, again as I mentioned in the book, part of the criteria in selecting a contractor, is based on their insurance coverage in the event of a trade disruption.
Perhaps a useful guideline is to confer with your state’s legislated required insurance coverage. In the interests of being more specific, I tried to look up your state of residence but I don’t find you in my customer database. So all I can suggest is that if insurance beyond worker’s compensation is required in your state, it’s not very difficult to find authorized carriers being a required matter.
Insurance to cover shipments is a matter of discussion with your supplier. It may be included as a matter of course but don’t assume it is. Make sure the coverage is sufficient to cover replacement costs. In other words, if your supplier only did the cut and sew portion and you sourced the goods elsewhere, the insurance should cover the full value of the shipment.
If you owe money, having taken out a loan (even purchase order financing, again as mentioned in the book), it’s possible you have limited coverage under the terms of the loan agreement. Not that I’d imagine you could expect to receive remuneration yourself but it would cover the party loaning you the money. This means your liability would be limited, reducing your need to come up with funds to service the debt for the duration of your difficulties.
For coverage of your home office (see the book, much of this is discussed there), confer with whomever carries your home owner’s policy. This is not nearly as difficult to add on as it used to be. Home businesses are commonplace these days.
In my personal situation, I recently requested an insurance quote from the company that carries our home owner’s insurance policy even though I’m not working from home. This is suggested because you may qualify for discounts for multiple policies even if you have a separate business location like I do. I wasn’t pleased with the quote I got. Not because it was expensive but because it wasn’t. Rather, it was suspiciously inexpensive. I don’t own the building but the quote barely exceeded $50 a month for coverage. So, I requested more in depth information about the coverage details. Would it cover replacement value? I was glibly assured it would. I mentioned that some of my books cost hundreds of dollars, some I suspect are irreplaceable, to which the agent said “you’d want to replace books?” I guess she doesn’t read. She promised to forward the details but I’ve yet to receive it. I need to call back. I have a dongle to insure. That alone is several thousand dollars.